tv Bloomberg Markets European Close Bloomberg June 6, 2016 11:00am-12:01pm EDT
"the european close" on bloomberg markets. ♪ mark: we take you from new york to london. here is what we are watching. sterling takes a leg lower against its peers after a surprising turn on the referendum vote. momentum for brexit is growing, taking a lead in the latest polls. deal,: with a starwood almost one quarter of the world's 3.8 million branded hotel rooms will be under the marriott name. we will check in with arne sorenson. mark: for structuring of the world's largest bank continues. after falling 17% this year, will hsbc stocks recover? 19 minutes into the
trading day in the u.s. let's go to the markets desk, where julie hyman has a look at things near to the ground. julie: coming out of the ground was a phrase one of our producers said. so oil, things that grow. commodities rally. that is powering stocks. one half in gains. energy and materials the best-performing groups from this commodity-led rally. they are in the top spots. financial rebounding from last week's declines. it is really only discretionary stocks in the red. oil prices working higher after we had the head of economic developing in abu dhabi protecting $60 oil by the end of the year as suppliers worked down. two point 3% gain. not quite $50 a barrel.
you have the likes of exxon mobil going higher today. conoco-phillips. we are also seeing agricultural commodities rise because of forecasts for regions like south america. we'd, corn, soybeans or is -- wheat, corn, soybeans all rising. the bloombergn of commodity index. if you want to look at the g its1543, it is up 14% from lowest of the year, entering a bull market. one of the things contributed has been the decline in the dollar, as well as supply starting to fall in many of the various commodities. mark: commodities the best-performing industry group on the europe stoxx 600. look at the indices on the global macro movement.
the ftse 100 is up because of commodities. sterling is down because of polls showing the "leave" cap is ahead. the yield on the u.k. 10 year is up. swaps, bondlt insurance is rising in the u.k. is a wonderful board, summarizing everything happening across markets. the -- here is one of the individual movers. cmh industrial. versusbeen rated to buy neutral at goldman sachs. it has also been added to the conviction list. shares have risen by 30% since falling to a record low on february 11. the price target has been raised to 8.3 euros from 6.1. today.pside from
today, we are at 6.9 euros. indiveor has been cut to a neutral. shares of the u.k. drugmaker than 30% after it won generic that will keep brands of a drug to keep opioid dependency down -- shares are down 10.4%. look at german factory orders from 2009 to 2016. this is a very volatile measure. is zero.ine fory, we fell 2% on demand investment goods outside the eurozone. do not read too closely into economistanalysts -- forecasts, because the chart is very volatile. acquisitioniott's
itstarwood could raise revenue nearly 40%. the issue is completing their merger as early as 2017. joining us is arne sorenson, president and ceo. things are coming along smoothly. you got rid of the timeshare business to what is the next challenge? arne: we are almost there. we have three government entities left that need to approve it from an anticorruption -- anti-competition aspect. we are optimistic we will have those approvals in the next month. we should be in a position to close in about a month. vonnie: how do you create the so-called "synergies"? we have three communities of interested folks we want to make sure see immediate, positive impacts of this transaction.
our community of associates in marriott and starwood hotels. the second is our community of guests. we have around 75 million members in the marriott award programs. and the third are the folks who own our hotels. owned byur hotels are independent real estate investors. we want to drive better returns for them. with each one of those communities, we are trying to do things right out of the gate. that-- then steadily after the next year or two so they can look at this and say it was good for them. vonnie: but with synergies, we really mean how many layoffs will there be? some jobre will be implications. 95% of the starwood jobs, may be higher, are in the hotels. we would not expect for there to be any significant impact to the hotels in terms of jobs, for obvious reasons. above the hotels, there are many folks involved in sales and
development and marketing, and those jobs should continue to be strong and perform well. the further up you get in the ceos -- you do not need to -- two ceos or cfos. so he will be on the senior ranks. mark: there seems to be a divergence in the u.s. operating market. some investors are not as positive as you. why do you remain so positive? not athe question is lodging question but our economy generally. the demand side of our business is driven by gdp growth, or correlates to gdp growth. growing, thegdp is stronger demand for hotels is growing. that is great for the business. when you listen to all of the market commentators -- and we had the jobs report friday --
eight is raising fresh questions. how healthy is the u.s. economy? ambivalencee the comes. if gdp comes back to the 2% to 2.5% range, demand should grow at the same pace. the business should define. if gdp declines and remains sub one or worse, it will have an impact. mark: how about how healthy is the u.k. economy? you have 68 hotels in the u.k. pre-referendum a spending habit and how bad things could become if the u.k. votes to leave the eu. will impact tourism, and investment plans from your company? it is tooummer specs, early to know what the impact of brexit, other than greenland's experience a few years ago. there is no prior friend --
there is no presidents for it. if the vote goes in favor of the exit, it will still be some number of years for the u.k. and eu to work out what the ramifications of that to business and travel and ability for people to move across borders. we will have plenty of time to adjust that. is your concrete strategy for taking on the likes of airbnb and also saturated markets like new york and miami, where we see continued hotel construction? arne: generally, we do not have a supply question in the u.s. and much of the world, but we have strong supply growth in new york the last five or six years. new york has been under-hoteled. grainy take that with a of salt, but we have heard from customers it is too hard to have a meeting in new york because it is too expensive or there are
not enough hotels to serve their need tapes so long-term, that serve their-- to long-term needs. i think increasingly, what we are seeing is the second generation or phase of these businesses is about micro-hotels. people dedicating four or five or 10 corporate apartments to nothing but being posted on sharing sites. that is not really a shared economy business. it is important that the rules apply fairly to the two. but we can compete against that product, just like we have competed against other hotel brands. mark: strongest markets right now -- list three. arne: it may surprise you, and i will do this because i think it is provocative -- china. we are all watching the news out their economy.
there is indication their economy is slowing. top line number, the chinese are moving to more of a consumer economy. have seen same-store sales grow nearly 10%, which is as strong for a big market as any big market we have got. thanks to arne sorenson, president and ceo of marriott international. let's check in on the bloomberg first word news. taylor has more. taylor: we are starting in france. insurance executives are meeting with officials in paris to look at the cost of flooding as the seine receipts. one report says those costs could go above $1 billion. an international aid organizations says islamic state militants have been firing at civilians as they try to leave fallujah. a number of those civilians have
been killed as they tried to cross the euphrates river. 50,000 civilians remain trapped there. hillary clinton victorious in the puerto rico democratic primary. just a few delegates short of clinching the party nomination. the polls in california, new jersey, and for other states tomorrow. the campaign of bernie sanders is denying claims it saw fewer polling places in puerto rico, saying the allegations are false. sanders is criticizing the way the island's primary was run, calling it shoddy. joinedand jordan have leaders who are set to speak at muhammad ali's funeral. president bill clinton will deliver a eulogy. the dalai lama was invited that sent regrets he would be unable
to attend. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. am taylor breaks. -- taylor riggs. mark: we are 18 minutes away from today's equity session. look at sterling. continues to move, falling against all of its peers. three polls in the last 24 hours showing the "leave" camp are ahead ahead of the upcoming referendum. will have live coverage of federal reserve chair janet yellen when she speaks at the world affairs council at philadelphia. that is 12:30 eastern. you can also see the event on the bloomberg through live go. do not missed analysis from tl ivgo. ♪
mark: live from london and new york, i am mark barton. i am vonnie quinn. this is the "european close." here's a look at the biggest business stories. marginal comments on the pound trade is to rise. the danish bank is telling banks to set aside 10% of their accounts. is planning to sell more than $3 million -- $3 billion to help finance its takeover of enc. securedes after dell
$20 billion of investment notes. thursday.ond price is deutsche bank says it is planning to set up a new digital banking service in the u.s. according to the ceo. he says pursuing the plan would divert from the bank's core strategy. much more ahead on "bloomberg markets." let's look where u.s. benchmarks are trading. the dow up two thirds of 1%. 116 points. half a percent of again in the s&p 500. half of 1%.lmost up let's look at other assets moving. 107.25.ar-yen at the yen not showing much malaise
vonnie: live at from beautiful london and new york, i am vonnie quinn. mark: it is beautiful here. i am mark martin. this is "the european close" on bloomberg markets. vonnie: brexit is back pay the pound tumbling. currency volatility in terms of the pound is surging after two polls show more britain's tonsrite a vote -- more bri
favor able to leave. mark: let's bring in jeremy cook, chief currency strategist at world first. is all complacency gone? was looking toe racecar that it is an 80% of ability we remain. they thought the brexit goose is cooked. catthese polls have put the amongst the pigeons again. see can see from -- you can from sterling and supply and demand. that a man for hedges over the past four or five trading days. overe demand for hedges the past four or five trading days. dollar-euro if brexit materializes on monday. 144 today. jeremy: 1.44 today. the week after the brexit vote,
sterling-dollar could collapse 15%. mark: you're not going on percent to 30% like some. jeremy: in a week. 50% is still a large move. not in a day. i would not be surprised if we saw some pick it up off the low. day,iquidity in that friday, that point fourth of june will be really poor. -- whipsaw movement will be fast. vonnie: i wanted to ask you -- we dive into the bloomberg terminal and talk about the volatility. the one-month -- it has been rising. at a high level. andhat a bet on speculation the immediate aftermath of a brexit vote or the economic consequences? jeremy: i think mainly it is people speculating on what may
happen with the price action in the 24 to 72 hours after we vote for a brexit. then the arguments around the uncertainty of what it means for monetary policy in the u k -- u.k. i think this is a global problem. a fair few people have said this is not a global issue. from a year p.m. theo, the impact on the ecb, whether we have further currency war like margins, all of this has to be factored in. vonnie: we have a great store on is saying that traders will man the store 24 hours that day -- not that they do not always, but that they will be intense for forex traders in particular. ignoring brexit, is there a way to be not exposed in any way to the pound? sat in if you are
london, then obviously not. given the trade size with the u.k. and europe, companies within europe and without europe have significant influence over about june may come 24. if they had that influence, that kind of skin in the game in the past year or 10 year or 20 years, it will be in effect on them june 24. mark: shall we talk about after that job report? have you changed your view of when the fed will hike? jeremy: we were september. we are staying september. we thought the economic conditions were not be there in june. i take this figure -- 38,000 is strange. the first to not be in triple digits for a long time. , think the verizon strike
whatever you want to call it, has had an effect. previously, when we have seen the consensus -- around 155 or 145 -- one we have seen such a big miss, it has been revised month around next 60,000. so that puts at around 100,000. still a bad number. stille wage numbers are looking ok. if you believe we are getting to some form of completion in the cannot beet, then we adding 200,000 people on a month by month basis. the fed inck as november, a couple members said what they believe the natural movement should be. most were around 1700. mark: good to see year. jeremy cook, world first chief economist and had currency strategists.
london. equities are rising. a commodities rally going on, giving a boost. commodity index is in a bull market. that is confirmed until the close. will andlikely it enable market. 20% up from january lows, boosting the ftse in london. those are the best and worst performing industry groups. finishing with their currencies and bonds, because sterling has been hammered after those three polls put the "leave" camp ahead. ♪ get ready for the rio olympic games
-- you are watching "european close." stocks finishing the session after their they disappointing u.s. jobs numbers. half 1% higher. basic resorts leading the advance. four .6%. oil and gas up 1.6%. the stoxx europe 600 fell last week for the first week in four. up to three polls in the last 24 hour showing the "leave" pushed -- implied volatility the next month to the highest level in seven years. sterling following against all 10 of its peers today. that is interesting. sterling is the only jeter and 10rrency to fall -- g-
currency to fall against the dollar in 2016. concern is putting money into the market. ais is the u.k. 10 year, up basis point now, but earlier falling to one point 25%. it fell to a record low friday after the jobs report. this is from 2007 102016. 2016.7 to we wanted to show you this chart. it shows the relative performance of the portuguese and the greek bond market. the portuguese bond market is the worst performing eurozone bond market this year. it is the only eurozone bond market that has registered negative return. the white line is greece. the blue line is portugal. the spread between the two is narrowing. consequently, the spread at 4%
is the lowest since the ecb announced its qe program in january last year. the ecb can buy portuguese bonds, it cannot by greek bonds. disappointment in the portuguese government unraveling some of to haveuguese austerity a bailout, which they have not exited. a fascinating chart, showing how the spread between portugal and greece has narrowed to the lowest since the ecb began its qe program last year in yield. vonnie: right. they are our the only countries you will get much yield in these days in europe. let's look at the broader u.s. markets. s&p 500 up about 10 points. the markets shutting off the friday jobs report. to 17,919.n -- up off ofdaq up 4/10 of 1%
its highs. abigail doolittle has more live from the nasdaq in midtown manhattan. up 4/10 ofe nasdaq 1%. one subsector outperforming are the online travel agents. this includes trip advisor, trading higher more than 3% on bullish comments from piper jaffray. michael olson is reiterating that he has more confidence in the second half being bullish for the company. these comments are taking higher. -- tripe and see trip advisor supports michael olson's price target is possible. we have a bullish uptrend, telling us buyers are in control. stock has a volatility, but it appears to trade near $80 per share. if they can break above, michael
olsons $95 price target could be insight, based on this bullish buying activity injured advisor. vonnie: what about other travel related stock moving against the trend? aigail: we have one that is bit weak. wynn resorts down slightly on a sector downgrade in hong kong. -- y wu has taken the citing a lack of earnings potential for the future. but shares of when result -- wynn resorts up. investors must believe a turnaround in macau is ahead. thanks. breaking news out of saudi arabia. an interesting development as saudi tries to create a real market for the real. arabia istor in saudi
cracking down on banks that are lowballing interest rate submissions according to people with knowledge of the matter. the agency has written to banks, instructing them not to submit are that the saudi sio are below what they are willing to lend. so let the real trade freely. let's check in on the bloomberg first word news. taylor riggs has more. taylor: the chinese vice premier met with u.s. trade representatives. the eighth round of the strategic dialogue to they are working on topics like how to advance both countries economic nets. this is day one of the annual two-day summit in beijing. ukraine's intelligence agency says it has awarded a plot to stop-- thwarted a plot to the european soccer championships. they have been following a
who was arrested on the ukraine-polish border last month. president obama will make his first presidential visit to spain for meetings on security and the economy. he will have to pull in for a nato summit and will add a stop to spain in july 9. he will meet with the acting prime minister and sit with the spanish king. of americans support legalizing marijuana according to a new poll from an attack university. 54% -- from quinn impact -- quinniapac university. medicallyt the use of prescribed marijuana. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. taylor riggs.
mark: hsbc is overhauling it investment banking unit. the new unit will be called andorate financials multinational banking group. this is a move to cut costs and boost revenues. shares of the bank have declined about 70% this year. joining us now is bloomberg's stephen morris. tell us about the structure of the investment banks. this is the latest change we have seen. comes underhat unit pressure to reduce costs and increase performance. they brought in a guy called matthew westerman from goldman to run the products line of this. hsbc tryingected of to win more market share, more wallet share from their clients. mark: what is the reason? stephen: as i am sure everyone knows, investment banking is
unstressed. interest rates are at historic lows. like many other investment banks in europe and the u.s., hsbc is trying to focus on its biggest clients, the one that it can bring the most money from. it is trying to bundle services together. when it deals with a private equity firm, it will try to sell a leveraged loan. changes are to try to help hsbc earn more from each big client. vonnie: at a time when other banks are cutting investment banking divisions or downsizing, isleast, the fact that hsbc keeping its headcount the same almost seems like it is doubling down on ib. is that the right strategy? a differentc has shortage a. smaller brokered -- it relies on the size of its networks and the ability to
offer a balance sheet. some people have lost their jobs in this shuffle. a few dozen, including senior &a and traders. so we are not seeing the same scale of cutbacks we are in places like barclays. vonnie: will investors react well or will they look for more from hsbc? stephen: they will certainly be appreciative of the efforts that management are making. the ceo of the whole group has, under a lot of pressure because of the declining -- has come under a of pressure because of the decline. betterthey see the results feed through, they will probably keep hsbc trading down. bloomberg news, reported stephen morris on the new structure of the investment bank.
vonnie: i am vonnie quinn. this is "european close" on "bloomberg markets." mark: coming up -- next week, msci will decide whether to include china. ftse russell has been gradually increasingthe way -- mainland chinese stocks, long investors to add at their own pace. vonnie: so where could we see the inclusion of chinese stocks in the ftse russell? joining us is the ceo of ftse russell, margaret these. is this a concern -- mark makepeace. is this a concern? mark m.: the question is we need theirlude china and indices. the china market is the second biggest market in the world.
to continue to exclude the market is something we cannot do long. vonnie: would you take a different decision and include china shares and other businesses? mark m.: we will include china indices in their global indices. we are different from our competitors here, because we have already given international investors an opportunity to bring china shares into their emerging-market benchmark. -- vanguardetf fund -- has begun that process. the inclusion has begun. the issue is the size of the asian market is so large. trying to manage that transition is going to be difficult. halted0% of a shares are still. critics of china remain. some say the recent market using measures -- they say there are
limits on how much funds could repatriate from china. other critics justify. extent. to some but regulators in china have progressed the market structure a long way the last three to five years. the biggest issue is that the market is predominantly a retail-driven market. driven by momentum. they desperately need institutional investors in that market for long-term investment -- or long-term investors who will bring stability. mark: how long will it take to get from entry level to full velocity when it comes to china as representation -- china's representation of emerging-market indices? mark m.: that is the most difficult question. i am certain that us and our competitors will include china a
shares in our standard indices. into the global benchmarks. the issue is will we include them initially at very low levels? emerging markets, in their transition index, is only 5% of a shares when it needs to be up to 30%. vonnie: when do you see it becoming 30%? moment, a letter that depends on how quickly international funds come into the market. vonnie: a chicken and egg situation. mark m.: but japan was the last time we had this issue, a long time ago. japan was included at a high weight. no international fan -- international funds held japan at that high weight. the international benchmark was not enough for the funds. concerned are you
about volatility for those benchmarks? mark m.: i think we are in a market where it is a low growth environment. we are seeing volatility -- at the moment, volatility is driven by events like the brexit vote, the election in the u.s. there is a lot of factors driving volatility. we can see real improvements in the chinese domestic market. but it will not be at the same level of the big mastic markets for years -- big domestic markets for years. mark: painted picture of the volatility on the day after the referendum if the u.k. votes to leave. mark m.: the brexit vote is causing a lot of uncertainty. the polls currently are mixed. there were two pulls out today which suggests there is a majority for brexit.
there is still a believe that the remaining votes will win. it is certainly going to be a lot of uncertainty. ideas torket has some how the vote will turn out, we will manage. if the market will not find out until thursday evening whether or not we are going to have a brexit or remain, then we will see a very volatile friday. the exchange business generally, do you see more consolidation? how are you keeping competitors at bay? the exchange market is very competitive. the markets are becoming global. scale and presence around the world becomes important. but there is new technology and entrance, so it is -- and viables, so it's a market. for the bigger guys, you have to keep providing the best service,
lowest costs. makepeaceank you mark , ceo of ftse russell. mark: time for the latest bloomberg business flash. has turned court away an appeal from the government of ecuador. billionontesting a $96 award to chevron. chevron bought texaco in 2000 one. chevron claimed ecuador violated provisions of the 1970's investment treaty by failing to resolve a loss in a timely fashion. -- the lack of deals in spain is fonica buying power.
it is asking banks to take 30% yes -- less than usual to revise on the deal. itsays it is rethinking tradition of annual raises for employees. the company says it will scrap staff on af rating five-point scale. chief executive jeff ml says he is seeking to streamline decision-making. facebook founder mark zuckerberg briefly found his twitter attack hijacked. facebook released a statement saying that nine of the company's systems -- that none orthe company's systems accounts have been accessed. that is the latest bloomberg business flash. coming up, it is battle of the charts. tiny nation, big return. why the luxembourg stock market -- joe weisenthal, i
vonnie: you are watching "bloomberg markets." time for our global battle of the charts, where we look at compelling charts and what they mean for investors. you can run the function featured at the bottom of your screen on the bloomberg. joe weisenthal kicking things off. joe: i am looking at the disconnect between where equities are going and yields and long-term government debt is heading. the yield on 10 year bonds in purple and white is s&p. both bonds in early february rally. then there was a diverges.
stocks continue to rally while the long-term yield declined. something similar again the last several days. the last few weeks, we have seen the s&p going over 2100, but long-term yields are stuck in the daughter -- in the gutter. if things are good and there is a risk on mentality, perhaps yields would go up. but they are widening again. we will see if they converge and which one converges with the other. you can find that chart on the terminal g #btv 1564. vonnie: beautiful and simple. ok. you have a battle on your hands, mark. mark: not enough love is given towards luxembourg's benchmark .tock index, the lux global stocks fell to eight to one half year low. -- the stoxxeurope
600, the like blue. indext luxembourg's luxx since february 11, when it also fell to it to an out year low. it has risen 26%. only greece, peru, russia, egypt, and brazil have said it. x is worth 40 billion euros. -- biggest since february 11, the world's biggest steelmaker has risen 124%, along with steel and iron o. re. two other investors account for two thirds of the gain. a bit of love for the luxx.
the balance has been restored. if you want to show your love, g #btv 1562 . was that chart, i think that is a runaway winner. x's.constituents and three where else will you get that. so mark, you are the winner. and joe, a wonderful runner-up. stay tuned for the next hour of "bloomberg markets." ofwill have live coverage federal reserve chair janet yellen at 12:30 eastern. you can see the event on the bloomberg through our live . function. ♪
>> from bloomberg world headquarters, good afternoon. r.i.m scarlet fu. -- i'm scarlet fu. stocks rising as speculation grows the fed will not raise rates after the jobs report. scarlet: we will look for clarity from federal reserve chair janet yellen. she will speak from philadelphia. alix: the debut of our weekly look at the dealscan be kickoff merger monday with gregg lemkau, global head of m&a at goldman sachs. scarlet: welcome back. alix: i missed you. scarlet: me too pay we are halfway through the trading day. alix of course on top of everything. let's check with julie hyman. julie: m